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This is a rush transcript from "On the Record," April 7, 2011. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST:President Obama is holding his ground, and there is no gray area. If today's House continuing resolution to fund the government for one more week, cutting spending by $12 billion and promising to pay the military through September, ends up on his desk, it will be vetoed.

VAN SUSTEREN: These are very serious times here on Capitol Hill, enormous implication to the American people if the government shuts down, although some would like to see the government shut down.

KYL: I didn't think it would come to this, but even if there is an agreement made later tonight, tomorrow morning, whenever, it will take time just to work it through the system. So it's quite possible that at least over the weekend, the government would be shut down. And you're right, it is serious. Think about this. Our military still reports for duty every day, but they don't get paid. That's wrong.

VAN SUSTEREN: Well, the House has passed a continuing resolution that's got to come over here to the United States Senate in which they fund the government for one more week, $12 billion in cuts, and also that the military will get paid until September 30th.

KYL: That's right. All...

VAN SUSTEREN: (INAUDIBLE)

KYL: Excuse me. Yes, all defense expenditures will be paid, not just the payment of the troops, but everything that we need to buy the equipment to run the operations, the whole thing. Yes, that's now passed through the House. The problem is, the president says he'll veto that bill. Now, why? Not to pay the military? Not to have $12 billion in reductions in spending? Most of which, by the way, the administration's already agreed to. I don't understand why he would threaten to veto that bill. The only other thing on it is a very small item that Vice President Biden voted for seven times when he was in the Senate. Speaker Pelosi has voted for it. Harry Reid has voted for it. The president signed a bill that had this item in it. It has to do with D.C. funding. I don't know why he would threat to veto that bill.

VAN SUSTEREN: What is the sort of the strategic -- because, I mean, chances are, that bill will never get to him if it doesn't get voted on...

KYL: Right.

VAN SUSTEREN: ... here in the United States. So he has total cover. He doesn't even have to say anything either way. So what would be the point of saying anything at all on that?

KYL: I honestly don't know because as soon as he said it, I thought, That is a gift to Republicans because Democrats have been saying, Well, Republicans want to shut the government down. So the House Republicans pass a bill to keep the government operating, to pay the military, to pay all of the other defense expenditures, and the president says he's going to veto the bill?

I do not understand that logic. Obviously, you're right. That bill is not going to be brought up by Harry Reid and the Democrats. We'll try to get a vote on it, but he'll probably try to amend it or something. I'm not sure what Harry Reid's strategy tomorrow is going to be if there isn't an agreement between the president and Speaker Boehner and Harry Reid either late tonight or early tomorrow morning.

VAN SUSTEREN: If the president and the Senate majority leader come up with an agreement, and the House speaker, does that necessarily mean, though, that everyone's going to agree to it here in the United States Senate? I mean, those three may come up with a great idea, but is there any guarantee that that agreement that those three reach will be agreed upon in the House and the Senate?

KYL: No guarantee, but here's the dynamic. John Boehner, the Republican Speaker of the House, would be able to pass the bill through the House because Republicans would support it in sufficient numbers. Harry Reid presumably would have the support of most of the Democrats in the Senate because he's the other party to the negotiation. To the extent that he needed any additional votes, you have Senate Republicans like myself who presumably would be in agreement with Speaker Boehner and therefore would also support it. So for all practical purposes, an agreement between Republican Speaker Boehner and Democrat Majority Leader Harry Reid would have the votes to pass both the House and the Senate.

VAN SUSTEREN: But there's some hot ticket items in it, at least as far as the freshmen Republicans in the House, is that they have certainly drawn a line in the sand and they're not -- I don't think they want their speaker doing a whole lot of bargaining on their number. And then over here in the United States Senate, there are issues having to do with Planned Parenthood which are near and dear to many Democrats. Senator Barbara Boxer, for instance, I'm sure is -- you know, is very -- she's always been a champion of Planned Parenthood. So that could -- I mean, there could be issues over here.

KYL: No, you've got it. On both sides, there are hard positions, strongly felt views. But remember, we're right up against shutting down the government. When the military isn't going to be paid, that's a time when people start making some kind of compromises. And there's always a way to do it -- OK, we'll deal with half of it now and we'll deal with the rest of it for next year, or we'll meet you halfway, or whatever the issue is, there's a way to compromise so that both parties could end up supporting it. But you're right, there may be people on the extreme left or right that may end up still voting against it.

VAN SUSTEREN: Well, I'm not sure I understand what the numbers is in the Senate because you don't have a bill here. I know what the number is coming out of the House when we hear reports on the Senate. But the other thing is that Senator Harry Reid says that this is a difference in ideology. That makes it -- I mean, if it's ideology, I don't know how you get movement on the numbers.

KYL: Well, you're right. And you look at the House-passed bill, it has the $12 billion in reductions, most of which have already been agreed to by the administration, and the Democrats, Reid, have said, We already pretty much agree on the numbers. You've got the funding of the military. I can't believe that the Democrats don't want to fund the military.

VAN SUSTEREN: They do. I mean, they -- I mean, and you Republicans are going to use it against them. But they do want to fund it, but they've been boxed in.

KYL: That's what I'm -- exactly. I can't believe they don't want to fund the military. I mean, I -- I know they do want to fund it. So that leaves, as I said, just this issue of D.C. funding of abortions. The president, as I said -- the vice president's voted for it seven times. It was the law the whole time that Bush was president. President Obama has signed a bill with that in it. That can't be that big of a deal to veto the whole thing and deny the troops the money that they need when they go to work and provide for their families.

There's a lot of politics to this and a lot of positioning. And I think that may be why the president threatened the veto on the bill. There's no other explanation, from my standpoint.

VAN SUSTEREN: President Obama -- if this were president George W. Bush or President Bill Clinton, any sort of different styles in terms of how they're handling this or moderating this or leading?

KYL: Yes. I think, for example, Bill Clinton, the great schmoozer, would have probably had people in earlier, and he's probably the most adept at getting everybody together and trying to figure something out. George Bush also had a good relationship with people on both sides of the aisle, at least early in his presidency. And I'm not sure how well he would have fared on this or not, but I -- my guess is he would have been engaged.

President Obama was not engaged until the last minute. And there's even some thought that Reid and Boehner were a lot closer to an agreement and when the president came in he upset the potential for that. I don't know that to be true. You hear a lot of things.

But both Harry Reid and John Boehner are serious people who understand the need to some kind of agreement here. They both have a hard job as you pointed out with people at both ends of the spectrum in their political parties.

But the president could have exercised greater leadership. I don't want to criticize anybody tonight. There's tune for agreement. We need to try to reach agreement. If they can do it I will applaud them all. Nobody wants to shut the government down especially so the people in our military can be paid when we send them to work every day to protect our interests.

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